Belfast Telegraph

Wednesday 27 August 2014

Ulster Bank £310m loss fuels mortgage fears

Warning over possible increase in cost of mortgages

The continued downturn in the property market has led to Ulster Bank suffering an operating loss of £310m in the first three months of this year.

The challenging economic situation — particularly in the Republic — has hit its performance.

Ulster Bank’s quarterly result showed operating profit was £84m before impairment — including bad debts — was taken into account.

Provision for bad debts —where the bank expects loans will not be repaid — increased by £67m to £394m.

Financial columnist Paul Gosling said the continuing losses were likely to lead to an increase in the cost of mortgages and other services for its customers. He said: “Ulster Bank will look locally at pricing and at ways to increase margins for both new and existing customers.

“There will be extra pressure to reduce the number of branches.

Homeowners with other banks will see mortgage repayments rise after a hike in interest rates. Customers with Halifax, Bank of Ireland, Clydesdale/Yorkshire, Co-operative will be affected.

A spokesman for the Ulster Bank said rates “were kept continually under review”. But it is understood its mortgage rates are driven by funding costs rather than provision for bad debt.

Ulster Bank employs around 2,000 people in Northern Ireland, with 350 jobs due to be cut through a redundancy programme announced in January.

Economist John Simpson said “at least two thirds” of the losses were down to the bank’s performance in the Republic. He said around 89% of lending on residential property was in the Republic and the rest north of the border.

Around 60% of commercial property lending was also in the Republic, 26% in Northern Ireland and the rest elsewhere.

Mr Simpson said a decrease in lending was reflected in the results. “The value of loans and advances to customers have declined by 4% compared to a year ago.”

Ulster Bank said it was continuing to work with customers who are in financial difficulty by offering a range of support initiatives.

Conor Devine of financial and property advice partnership GDP said: “These problems are all to do with the chaos of the property market. I believe this will be the way for the next few years until the property market improves.”

Ulster Bank is owned by Royal Bank of Scotland, which is 82% owned by the taxpayer since it was bailed out in 2008.

It reported an operating profit of £1.1bn compared to an operating loss of £144m last year.

RBS boss Stephen Hester said Ulster Bank faced “exceeding difficult” market conditions.

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